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International Summary

"CAPIS Global Markets 8/09/2018"

posted by Matthew Kiselica on 08/09/2018 at 6:47 am

by Matthew Kiselica

08/09/2018 at 6:47 am

Asian Markets

A solid day as the Chinese markets led the region while a stronger ¥ and trouble in the auto sector caused Japan to lag.  A declaration by regulators (the CSRC) rules would be relaxed to permit greater market access to foreign funds drove the Chinese gains. This is an interesting development considering CNBC speculated the recent trade spat may spur further Chinese reform.  Additionally, Premier Li will spearhead initiatives regarding further technology development.  That caused IT to be among the region sector leaders with a 1% gain.  A strengthening yuan provided lift to the Chinese airlines.  Most other sectors were also green.  However, energy fell following yesterday’s crude decline due to the Chinese tariffs on U.S. related products.

Chinese inflation was front in center on the macro front.  Both the July m/m and y/y results beat expectations.  The m/m result was an unexpected increase and the y/y advance was the largest since March.  PPI was also ahead of consensus.  Japan’s June core machine orders plunged much more than expected m/m with a miss on the y/y release, as well.  The government was forced to cut its assessment for the year.

Other Important Headlines

  • The Japanese auto sector was driven lower by the stench of a widening emissions scandal.  Authorities declared Suzuki -6.0%, Mazda -1.3% and Yamaha -4.6% conducted tests that failed to meet the standards.
  • China Mobile +1.7% reported strong H1 results that were 3.5% above consensus.  Operating revenue rose 2.9% with 4G users higher by 4.5%.
  • Bridgestone +0.4% wobbled following its FY results before ending the day higher.  H1 revs were off c. 2% with profit up about the same and NI up 4.4%.  It cut its FY outlook for revenues 1.6%, OP 7.1%, NI -1%.
  • Investors anteed up on Crown Resorts +6.7%.  H1 high-stake gambler turnover jumped 55.0% while revenue and profits also beat estimates.  Elsewhere in the sector,  Galaxy Entertainment +1.1% spent most of the session to the upside following yesterday’s results and M&A speculation.  Reports allege Chairman Lui has his eye on Wynn Resort/Wynn Macau +0.2%. (This had been out during the U.S. session.
  • Komatsu’s -1.8% Chinese equipment sales were essentially flat y/y.
  • Fonterra (halted) created a milky picture by stating “there may be a variation from the earnings guidance.”
  • The RBNZ kept its benchmark rate unchanged at 1.75%, as expected.  It signaled rates would remain at the current record lows for two more years.  This sent the “Kiwi” lower.

European Markets

The region’s markets have spent most of the session down small and are currently near the day’s lows.   Most sector are red.  Those with losses of 0.5% or more include energy, health care, telecoms, consumer staples and construction.  Retail and basic resources are better by about the mark.  S. Africa is closed.

Russia is trading lower following the U.S. imposing new sanctions regarding the U.K. nerve agent attack.  For its part, Russia says the charges are unfounded.  On a related note, Rusal may halt some of its production if U.S. sanctions are not lifted. U.S. customers have been ordered to stop business with the company by Oct. 23.

Snippets from the Region Include

  • Adidas +8.5% has run to the top of the Euro Stoxx 600.  The company posted a strong set of earnings.  Q2 organic revenues grew 10.0% besting the 8% expectation.  It benefited from the trifecta of strong sales for the World Cup, N. America and China.
  • Staffer Adecco’s -3.5% Q2 EPS were 10.0% below consensus.  Costs the company indicated would decrease during the quarter increased.
  • Deutsche Telekom -0.15% raised its FY adj. EBITDA guidance to €23.4b   This was largely due to improved performance at T-Mobile.  Overall sales were a touch light.
  • EBITDA  at Merck KGAA -3.6% was below the range.   The company noted the loss of market share for a key cancer medication, poor performance at its liquid crystal unit and currency headwinds.
  • Zurich Insurance +0.1% says it is confident of reaching 2018 and 2019 targets following H1 results that were a touch ahead.  ROE was better than projected, the combined ratio lower and cost savings are on track.
  • Kerry Group +1.5% raised its FY outlook a touch despite H1 results falling below estimates.  It now sees constant currency EPS growth of 7-10% from 6-10%.  This may be due to my wife’s increased purchases of the company’s Kerrygold butter and Dubliner cheese.

 

On Our Side of the Pond

  • Rite and Aid and Albertsons have ended their merger agreement.
  • Dun & Bradstreet is being acquired by a consortium of investors.  The bid of $145 per share is a c. 18.0% premium to yesterday’s close.
  • Tribune Media has terminated its merger with Sinclair Broadcasting.
  • Q4 revenues at 21st Century Fox beat the highest estimate.

Markets and Macro

Markets Snapshot

Event Survey Actual Prior Revised
JN Housing Loans YoY 2Q 2.70% 2.70%
JN Money Stock M3 YoY Jul 2.70% 2.60% 2.70% 2.60%
JN Money Stock M2 YoY Jul 3.10% 3.00% 3.20% 3.10%
JN Core Machine Orders MoM Jun -1.00% -8.80% -3.70%
JN Core Machine Orders YoY Jun 10.50% 0.30% 16.50%
JN Japan Buying Foreign Bonds 3-Aug ¥1171.0b ¥526.5b ¥526.6b
JN Japan Buying Foreign Stocks 3-Aug ¥505.0b ¥251.0b
JN Foreign Buying Japan Stocks 3-Aug -¥225.2b -¥63.4b -¥62.5b
JN Foreign Buying Japan Bonds 3-Aug -¥661.5b ¥538.8b
CH PPI YoY Jul 4.50% 4.60% 4.70%
CH CPI YoY Jul 2.00% 2.10% 1.90%
JN Tokyo Avg Office Vacancies Jul 2.58 2.57
SK Money Supply L SA MoM Jun -0.10% 0.60%
SK Money Supply M2 SA MoM Jun 0.50% 0.50%
SK Bank Lending To Household Total Jul KR796.6t KR791.8t KR791.9t
JN Machine Tool Orders YoY Jul P 13.00% 11.40%
EC ECB Publishes Economic Bulletin
CA Housing Starts Jul 219.0k 248.1k
US Initial Jobless Claims 4-Aug 220k 218k
CA New Housing Price Index MoM Jun 0.10% 0.00%
US Continuing Claims 28-Jul 1730k 1724k
CA New Housing Price Index YoY Jun 0.80% 0.90%
US PPI Final Demand MoM Jul 0.20% 0.30%
US PPI Ex Food and Energy MoM Jul 0.20% 0.30%
US PPI Ex Food, Energy, Trade MoM Jul 0.20% 0.30%
US PPI Final Demand YoY Jul 3.40% 3.40%
US PPI Ex Food and Energy YoY Jul 2.80% 2.80%
US PPI Ex Food, Energy, Trade YoY Jul 2.70%
US Bloomberg Aug. United States Economic Survey
US Bloomberg Consumer Comfort 5-Aug 58.6
US Wholesale Inventories MoM Jun F 0.00% 0.00%
US Wholesale Trade Sales MoM Jun 0.20% 2.50%

About the Author

MatthewKiselicaFVP,Manager of International Trading

Matthew Kiselica joined CAPIS in 2010 and has over twenty-five years of industry experience. Prior to CAPIS, he was vice president of Cazenove’s global sales trading desk in New York. Matthew is a board member for the National Psoriasis Foundation. He earned his bachelor’s degrees in fina...

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